The Impacts of Technology, Trade and Outsourcing on Employment and Labor Composition

Empirical studies of skill-biased technological change are typically based on a simple production or cost function framework and limited information on technology and labor composition. In contrast, we simultaneously assess the impacts of trade, technology, and outsourcing on shifts in labor demand using a dynamic cost function framework and comprehensive measures of workforce composition and investment in technology. Our findings indicate that technological change has had the largest impact on changes in labor composition. However, the indirect impact of trade on shifts in employment augments its direct impact because trade stimulates computerization, which further exacerbates skill-biased technological change.